'Emptied my kids' accounts': Franchise giant in law firm's sights

A law firm famous for taking down some of the world’s largest corporations has launched an investigation into Australia’s biggest franchise company just days after an explosive A Current Affair report concerning allegations about its treatment of franchisees.

Bannister Law is locked in legal battles with heavyweights such as Volkswagon, Audi, Ford, Dick Smith, and Nurofen and it today revealed it has launched an investigation into Retail Food Group, the owner of franchises including Michel’s Patiserie, Brumby’s, Gloria Jean’s, Donut King, Pizza Capers, and Crust Pizza.

A Current Affair’s Reid Butler on Monday night reported on allegations concerning RFG’s franchisee fees and alleged poor quality products, as well as financials that appear to not accurately represent the store’s earning potential to buyers.

Robert Verni and his family lost more than $1 million. ()

Store numbers have significantly declined under RFG as many of its franchisees have gone broke.

Former Michel’s Patisserie owner Rob Verni and his family lost more than $1 million, including his home, as he and brother-in-law Paul Rubini tried for two years to sell their business.

Mr Verni claims RFG sold the Robina Town Centre business within about three months after they vacated.

Bannister Law said in a statement today it would investigate if RFG misled incoming franchisees about the earning potential of stores.

Robert Verni said he had to empty his children's bank accounts to stave off ruin. ()

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It’s also likely to investigate whether fees, lumped on RFG’s franchisees, are excessive.

“We were drowning (in debt) and we warned them we were drowning,” Mr Verni said.

Mr Verni, who claims his store went from one of the top performing BB’s Café’s to a failing Michel’s under RFG, told A Current Affair of the extraordinary lengths he and his wife went to in paying off RFG.

“I had to take everything out of our life savings, my in-laws, my kids accounts,” he said.

Franchisees claim they were forced to sell substandard produce. ()Franchisees claim the new frozen food has led to a drop in customers. ()

“Try to tell your kids (they) don’t have an education because I’ve got to rip money out of their accounts so we can continue to put bread and butter on our table.”

But it was two expensive store refurbishments costing $150,000 each, along with a rent increase of up to 85 percent, in a matter of a few years that tipped Mr Verni over a financial cliff.

“It felt like a trap, even after we told them we can’t afford it,” he said.

RFG shareholders are now feeling the pain of the fallout, with a staggering $550 million wiped off its market capitalisation since Fairfax journalist Adele Ferguson’s expose featured on the front pages of the newspaper company's mastheads.

Distraught former franchisee Jenny Teng with her son. ()

RFG’s share price dropped from $4.40 on December 8 to a low of $1.62 on December 20.

It then recovered to $2.57 by December 27 but is again in decline at $2.06. It fell almost five percent by today’s close after Bannister Law’s announcement this morning.

Banister Law is teaming with franchisee advocates Michael Fraser and Maddison Johnstone from Franchise Redress, who have contacted more than 100 franchisees, many of which allege “issues around the company’s goodwill, the viability of stores at sale and the lack of appropriate disclosure”.

Photos appear to show products delivered to stores are already damaged. ()Store numbers have significantly declined under RFG. ()

“They’re ultimately selling lemons to suckers,” Mr Fraser said.

RFG spokeswoman Sara Bradford said “in the event a class action did proceed at some future point, RFG would defend it vigorously”.

“As Australia’s largest multi-brand retail food franchisor, we are proud to support numerous small businesses across Australia.